Family labor supply, precautionary behavior, aggregate saving and employment
AbstractI study the impact of idiosyncratic earnings uncertainty on aggregate saving and employment in an economy populated by families consisting of two members. Families incur a fixed cost of participation when both members are employed. I argue that, because of market incompleteness and private information, the presence of this fixed cost can generate multiplicity of equilibrium. In particular there might be one equilibrium with high (female) employment and low savings and another one with low employment and high savings. The model suggests that aggregate saving and employment rates should be negatively correlated across countries. Finally, I present empirical evidence that supports both the partial and the general equilibrium predictions of the model.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2113.
Date of creation: 2005
Date of revision: Mar 2007
Aggregate saving; Employment; Family labor supply; Multiplicity;
Find related papers by JEL classification:
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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